Based on the assigned scenario for Katrina’s Candies, assume that now there is a significant degree of interdependence among rival firms in the candy producing market. Please respond to the following questions.
a.) What market structures will Katrina’s Candies operate if the above condition prevails? I think Katrina's Candies would be successful operating in an Oligopolistic Structure. Oligopoly is a market structure characterized by a small number of relatively large firms that dominate an industry. The market can be dominated by as few as two firms or as many as twenty, and still be considered oligopoly. With fewer than two firms, the industry is monopoly. As the number of firms increase (but with no exact number) oligopoly becomes…show more content… Many firms may have to seek profit maximization through trial and error. e.g. if they see increasing price leads to a smaller % fall in demand they will try increase price as much as they can before demand becomes elastic.
It is difficult to isolate the effect of changing price on demand.
Demand may change due to many other factors apart from price.
Firms may also have other objectives and considerations. For example, increasing price to maximize profits in the short run could encourage more firms to enter the market; therefore firms may decide to make less than maximum profits and pursue a higher market share.
Good post and I choose game theory as well. Game theory deals with any situation in which the reward of any one player (called the payoff) depends on not only his or her own actions but also on those of other players in the game. Game theory provides a technique that is suited to investigate such interactions, but as applied in the research literature it is a far more mathematical treatment than might be suggested by our attempt to explain its nature in a simple way.
Suppose you provide consulting services on price-setting strategies to a number of